Investing · Jurisdiction EU

Custody of fund assets

In a UCITS the assets sit with a depositary, not on the management company's own account. Custody risk is the question of whether that separation holds.

In more detail

Article 22 of the UCITS Directive requires a single depositary. Financial instruments that can be held in custody are booked in segregated accounts in the name of the UCITS, or of the company acting for it, so they stay identifiable as its assets. That is a legal structure. It is not the same as the issuer's credit risk, and it is not a statement that a loss is impossible.

Background

Read next to ETFs, risk and the prospectus: who holds the securities is a different question from who issued them. Finmon checks no depositary and names none.

An example

The shares in the fund belong to the fund assets and sit with the depositary in a segregated account. The management company's failure is therefore not automatically the failure of those shares. How protection works in a given case sits in the law and in the documents.

A common misconception

Fund assets simply sit on the management company's account, like a company till.

Article 22 requires a depositary and segregated accounts so the instruments stay identifiable as assets of the UCITS.

Source: ESMA · UCITS Article 22. Last reviewed: 2026-10-29. Editorially reviewed on 2026-10-29. Next review 2027-10-29. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.